Brazil's Gerdau sees income drop by nearly a third as sales sink

SAO PAULO, Aug 12 (Reuters) - Brazilian steelmaker Gerdau SA posted a sharp drop in second quarter net profit on Wednesday as sales fell in both its domestic and North American divisions.

Gerdau, the largest long-steel producer in the Americas, reported net income fell 32.6 percent to 265 million reais ($76.37 million) in the second quarter, compared to profit of 393 million reais in the same quarter last year.

The company said in a securities filing that sales volumes in the Brazilian market fell 20.5 percent due to a slowdown in industrial activity and construction.

The Brazilian economy is expected to shrink about 2 percent this year and post zero growth in 2016 as higher interest rates, lower commodities prices and broad government austerity measures drag down consumer confidence and weigh on domestic consumption.

Sales in Gerdau's North American division dropped 6.4 percent from a year earlier. The company said the comparative decline was due to more competition from imports and an exceptionally strong second quarter a year ago.